Credit card Processing, Merchants, and Bitcoin - CoinAxis

Credit card Processing, Merchants, and Bitcoin - CoinAxis

Credit card processing, merchants, and bitcoin

As more small businesses dive into the online marketplace, many are encountering some substantial obstacles. Often, small businesses are led to believe that moving online, achieves a different level of freedom, and income. This may be true for some, but not all.  For most small business operations rely heavily on a positive cash flow. Extra fees, chargeback, and fraud, can be the nail in the proverbial coffin.

Merchant payment processor


If we look at the basic, merchant account processors, we'll find they all charge for the same basic services. Services such as paypal are slightly different, as you can keep your money stored within paypal.  Although, I don't recommend keeping large balances in paypal, they have had a long history of freezing accounts, for less than straight-forward reasons.

Below are some standard fees merchant card processors charge, and approximately what their average cost is.

Monthly Minimum: $25.00
Per transaction fee: 1-3%
Gateway Fee: $5-$15
Statement Fee: $7-$10
Address Verification: $0.00 - $.05

Upon first glance, these fees do not seem like they are exorbitant, but when you add-in other costs of doing business, these fees can consume the profit margin needed to survive.  With dwindling margins, in a highly competitive online marketplace.  It can be an uphill battle against online giants, such as Amazon.


To explore this further.  Let's evaluate the following scenario, over the course of one month:

Gross Online sales: $5000
Sales Margin:  20%
Gross profit: $1000
Less 3% fee: -$150
Less Gateway fee: -$15
Less Statement fee: -$10
Net Profit: $825

Now, if we include a typical scenario of fraud, and chargeback.  This can impact the profit margin even further. 

Fraud cost: -$50
Chargeback: -$50
Shipping costs: -$50
Time lost: -$????

Net after loss: $675

The time lost dealing with fraudulent customers, and chargeback, could easily consume the remaining $675.  This is especially true, if you have employees.  Not to mention the fixed, overhead costs of running a business.  Really, the only way a business of this type could survive, is if it tripled its sales.  For small businesses, this is easier said, than done.

Bitcoin - A solution

bitcoin payment processor

Small businesses, especially online merchants, seem to take the brunt of the credit card companies antiquated system.  With unscrupulous buyers, abusing the chargeback system, and committing fraud.  There really isn't a good protection mechanism for the low-volume, e-commerce site.  Until now.

Enter bitcoin.  There are some distinct advantages that bitcoin offers.  Especially for the small business owner.  They simply do not have time, nor the margin of error, to deal with the issues associated with credit card processors.

Bitcoin offers a different kind of payment system.  It can be implemented without the need for a 3rd party credit processor.  There are no chargeback, and all sales are final.  Once you are paid in bitcoin, you own those bitcoins.  Thus, eliminating the fraud aspect of your sales.  The transaction fees are very low, and there are no monthly minimum fees,  or gateway fees.

There are two ways a merchant can accept bitcoin.  The first is, configuring their own bitcoin wallet & online shopping cart.  The second is to use one of the online wallet services, that have merchant tools.  These online wallet services provide the necessary code snippets, widgets, and modules, to have a fully functional online store.  Or, you can manually email customers invoices, with the bitcoin payment address built in.

Practical Comparisons

Let's take the same scenario, as we discussed above, except with bitcoin.

Gross Online sales: $5000
Sales Margin:  20%
Gross profit: $1000
Less 0-.99% fee: $0.00 - $49.50
Less Gateway fee: $0
Less Statement fee: $0
Net Profit: $950.50 - $1000

Now, the same scenario of fraud, and chargeback. 

Fraud cost: $0
Chargeback: $0
Shipping costs: $0
Time lost: $0

Net after loss: $950.50 - 1000

As you can see, accepting bitcoin as the payment processor, provides the merchant an additional $125.50 - $175 per month.  Also, the time saved by conducting business, instead of chasing down fraudulent purchases, and dealing with the credit card processor and/or banks.  A note on potential product returns:  Just because the customer cannot do a chargeback to their credit card, does not mean the business can take advantage of them.  Businesses have to rely on trust, recommendations, and repeat business.  Once you start treating your customers badly, nothing will save your business.  So, take good care of your customers and they'll be loyal and happy.  Making you a successful business owner.

If you have any questions about this article, or if you need assistance getting your business accepting bitcoin, please do not hesitate to contact us.  

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